US tax code must be rewritten to make America’s wealthiest pay their fair share
The Panama Papers leak of millions of financial documents in 2016, and later the Pandora Papers in 2021, revealed global offshore tax havens used by the world’s richest and most powerful people to hide their wealth and avoid paying taxes.
But Morris Pearl and Erica Payne argue in their new book, “Tax the Rich!” How Lies, Loopholes, and Lobbyists Make the Rich Richer,” that the vast majority of America’s wealthiest families don’t need to deposit their money in offshore accounts to evade taxes. Rather, they say that wealthy Americans, with the help of politicians they control, legally use the US tax code to minimize or avoid paying their tax bill.
Between the lines, Scott Harris spoke with Pearl, former chief executive of BlackRock, the world’s largest asset manager who now chairs the Patriotic Millionaires, a group of hundreds of wealthy Americans who strive to ensure that corporations, millionaires and billionaires love themselves, pay their fair share of taxes. Here, Pearl discusses the inner workings of a system designed to make the rich richer and everyone else poorer.
MORRIS PEARL: What I realized while we were writing the book and talking to people is that different types of people make money in different ways.
Most people, most of you who are listening to this radio show right now get a paycheck every week or every month and attach a tax to that paycheck and you understand how much money you make and how much goes to taxes in your pay stubs.
However, it is different if you are very wealthy. I do not receive a salary. I withdraw money from my brokerage account all the time. So rich people who are already rich do not need income. And we only tax income in this country.
So as long as I can spend a lot of money without having any income, I don’t have to pay taxes. And if you’re already rich, you don’t need income. And that’s basically why these people who are already rich are getting richer and richer and richer because their money is growing, their investments are doing well, and they don’t pay any income tax. While most people, even if they try to save money, a big chunk of every paycheck goes to income tax, so they fall further and further behind each year. And we try to explain in the book how all these different tax rules work and why the wealthiest among us don’t pay a lot of taxes relative to our income.
SCOTT HARRIS: How come in the United States, Morris, we don’t tax wealth and only income, as you just described? Are there other countries that tax the wealth of their citizens who evade income tax?
MORRIS PEARL: We had a wealth tax when the country started, almost. Most taxes were property taxes back then, and most wealth was real estate. Everyone who was wealthy owned land and was therefore taxed on their wealth.
And in fact, most of you are still taxed on your estate. If you own a house almost anywhere in the United States, you pay wealth tax on most of your assets, which is your house. You pay property tax every year on that wealth, on that house, which is the bulk of most people’s wealth.
I don’t pay wealth tax as an investor because there’s no wealth tax on things like stocks and bonds and investments and just about anything else except real estate. It’s not that our country has changed the rules, it’s that things have evolved so that most wealth now comes in the form of businesses and corporations and stocks and not actual land, which are taxed through a wealth tax. So we have to change that. We believe that we should force the wealthiest among us to pay a wealth tax, as you all do now.
SCOTT HARRIS: Elizabeth Warren was among some lawmakers proposing a specific wealth tax. What do you think of what she came up with or what others came up with that you think would work best?
MORRIS PEARL: I think we need something like this. And Senator Ron Wyden of Oregon has made proposals that are actually quite similar conditions for taxing unrealized capital gains.
And we need something like that. And people say, “Oh, that’s too complicated. We can’t deal with it. Well, the few people who have billions of dollars of wealth usually hire accountants to handle their taxes.
They could take care of it. The country already assesses wealth when it does state taxes so we can do that every year and they may have rules to deal with things that you don’t know what their value is and figure that out and catch up later and mix them with interest or whatever.
So I’m not really worried about the complexity of that. I think we need – not on ordinary people. That was the problem they had in France, they were trying to make everybody pay a wealth tax. And all the owners in France were quite unhappy about it.
We need to levy a wealth tax not on the first million people, not on the second million. Not even on their hundredth million. But we have to levy a wealth tax on the second billion dollars of wealth, as Elizabeth Warren says.
For more information on Patriotic Millionaires, visit patrioticmillionaires.org.